The return of Iranian oil to the market and its repercussions on the Iraqi economy

The return of Iranian oil to the market and its repercussions on the Iraqi economy

04/08/2015

The diversification of the Iraqi economy and reduce its dependence on oil slogan raised by successive governments in all covenants. And witnessed the history of Iraq’s attempts to translate this slogan on the ground to allocate oil revenues to invest in development projects in the monarchy as the formation of the Council of reconstruction. In the republican era slogan “Agriculture permanent oil” in the position of the view that the development of other economic sectors, the most effective long-term dependence on oil to form a major source of national income.

But mismanagement and Alawamra economy and bureaucratic planning foreign adventures and dragged him from all wars and blockade combined to pre-empt any attempt aimed at the end of the addiction Iraqi governments on oil revenues in supplying the state treasury money mode.

Rather than return to the diversification of income sources to develop non-oil sectors have seen years that have passed since the change in 2003, increasing dependence on oil revenues to finance public spending. The drawing of plans to diversify the economy to ensure that corruption and political conflicts and security conditions prevent the takeoff.

Thus, the Iraqi economy remained economical unilateral where oil contributes more than 90 percent of the state budget. The Iraqi people are paying the price for the day of missed opportunities when the state treasury was brimming revenues were enough to invest in the development of other economic sectors. The cause of falling oil prices in the cash-strapped government had hoped to take austerity measures to compress expenditure of resources available and directed towards funding the military effort in the face of Daash on investment projects account.

In these situations, the nuclear deal with Iran that can bring Iranian oil to the world market after years of embargo and Western sanctions came. It is enough to get an idea about the size of losses that could be incurred by the Iraqi economy, the return of Iranian oil to the market that the measurement of Brent oil prices fell more than 5 percent immediately after the announcement of the nuclear deal between Iran and the group of six world powers in the Swiss city of Lausanne. This is before he injects extra barrel and one of Iran’s oil to the currently bloated surplus of about two million barrels a market note that Iran has 30 million barrels accumulated in the tanks and ships because of the ban and could be available in the market to lift the sanctions on Iran, according to the newspaper Financial Times. She FACTS Global Energy Company Facts Global Energy consultancy, said the lifting of sanctions could increase Iran’s oil production by 500 thousand barrels per day within three to six months and by 700 000 barrels per day during the year.

This is all bad news for the Iraqi economy, which already suffered heavy losses from the fall in oil prices by about 50 percent since last June.

Radio Free Iraq met with a member of the Commission on oil and energy parliamentary Zaher al-Abadi, who said that Iraq will not be a choice but to increase its oil exports to mitigate the negative effects of the slump in oil prices because of Iranian oil return to the market.

He Zaher al-Abadi concern about the repercussions of the economic hardship on the Iraqi street, if the financial crisis exacerbated by the lack of the ability to increase Iraq’s oil exports, even if Iraq was able to increase its production to four million barrels per day.

He urged the Commission on oil and energy parliamentary member Zahir al-Abadi government to find other sources of income other than oil, who said that reserves of about 140 billion barrels run dry within fifty years, the decision maker to think the outcome of the conditions of Iraq, then if its dependence on oil continues.

Attorney Abadi strongly rejected the proposal, Finance Minister Hoshyar Zebari, calling for mortgage oil through forward sales unlocks the price now and paid for later shipments of oil to provide cash employ for the advancement of the economy, wondering what the guarantee that these funds are used to pay for economic growth in light of rampant corruption in the joints of the state.

Commission on oil and energy parliamentary member Kawa Mohamed noted that the economic effects of the nuclear deal between Iran and the P5 + 1 will be extended to all oil-exporting countries, the return of Iranian oil to the market, but Iraq will be the hardest hit, including the adoption of the 90 percent of its financial resources on oil revenues Unlike other oil-producing countries which reduced its dependence on oil sales to 50 or even 30 percent, for example.

He repeated MP Mohammad Kawa usual call to diversify their sources of income the state to implement long-term strategies for the development of other sectors such as industry, agriculture, and organizing the collection of taxes and other measures that increase the state’s resources.

Member of Parliament for the National Alliance, a good mixer saw that the price of oil in the world market is not determined by the Iranian or Iraqi oil alone, but exports of oil-producing countries in general, whether they are members of the OPEC countries or non Almentema to the organization.

Economic analyst Majid picture pointed out that among international factors and territory interference in determining the supply and demand and therefore the level of prices in the global oil market, and therefore can not take Iran’s oil and return in isolation from these other factors such as the growth of the global economy or slowing growth and political stability and resolving regional conflicts, etc. .

He explained that the picture of the lack of fixed factors to determine the price of oil makes it difficult to predict the direction of prices in the future, especially as the supply and demand laws are only one factor among multiple factors such as financial and political speculation, referring to estimates conflicting between the expectations of higher oil prices this year to $ 60 a barrel and $ 80 to 70 in 2016 and studies expect the price to drop to $ 30 and even less this year.

He said that the picture of talking about real development would be meaningless without giving up the rentier perception that perpetuate dependence on oil and the launch of productive economic activities to activate the private and public sectors and to provide an appropriate atmosphere for investment.

He economic analyst Majid picture convinced that Iraq has enough natural resources and human energies and technical capacity to end its dependence on oil, provided that available with good governance.

Oil Minister Adel Abdul Mahdi, announced earlier this year that the increase in oil production that will contribute to compensate for the drop in oil prices. The Deputy Prime Minister Shaways Rogge said at an economic conference in London in late 2014 that Iraq might reconsider his plans ambitious to increase production.

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